Tuesday, March 01, 2016

Too Insane For A Title

TOKYO—The Japanese government is now getting paid to borrow money, after selling benchmark bonds with a negative yield for the first time Tuesday.

No, really.

(T)he Ministry of Finance sold 10-year bonds with an interest rate of 0.1% at the average price of ¥101.25, producing a yield of minus 0.024% if held to maturity.

Someone on the web said that the only governing principle of the Democrats here in America is "more." More spending, more regulations, more borrowing, more, more, more. It hasn't resulted in anything good, of course, but one of the advantages of being a secular postmodernist is that icky things like objective measures of success no longer apply. There's no reason why that governing principle doesn't apply globally. More borrowing, more spending, more, more more.

6,000 years of human experience that led people to conclude that best way to prosperity was creating, saving and investing has been discarded in favor of more, more, more. Well, what did they know? They didn't even have iPads!

In any case, that particular Rubicon, negative interest rates for the government, has now been crossed by an ostensibly first-world country.

Here is the thing, though: while the Japanese government is quite profligate and indebted, the actual population of Japan is evidently as committed to personal savings as they ever were (and for as long as I can remember, the personal savings rate for individual Japanese citizens has been among the highest, if not the highest, in the world). According to http://www.tradingeconomics.com/japan/personal-savings,

"Household Saving Rate in Japan increased to 49.70 percent in December from 10.70 percent in November of 2015. Personal Savings in Japan averaged 11.69 percent from 1970 until 2015, reaching an all time high of 49.70 percent in December of 2015"

So it looks to me like what is happening is something like this: (a) companies are making more goods and providing more services than there is demand for, and want people to be encouraged to Buy More Stuff; (b) the government creates a bunch of money and spreads it around in hopes that people will use it to buy things, but instead (c) practically everybody runs off and socks it away in their bank accounts.

And, when the banks have all this money deposited with them, what are they going to do with it? There is no demand for more goods and services, so there aren't enough new or expanding business for them to invest it in. So what do they do? They buy government bonds.

So the government is, in effect, saying "Hey, we don't want your damned money, we want you to spend it! On something! Somewhere! Please! Don't just give it back to us!"

Ultimately, it the widespread use of the cheat codes in video games -- the kiddies grew up thinking that in reality, as in video games, there are no ground-rules or limits except those one is willing to accept.